MACQUARIE FUNDS GROUP Macquarie emerging markets infrastructure securities Fund

Transcription

1 MACQUARIE FUNDS GROUP Macquarie emerging markets infrastructure securities Fund PRODUCT DISCLOSURE STATEMENT Dated 16 July 2010 Issuer: Macquarie Investment Management Limited ABN AFS Licence Number ARSN APIR code: MAQ0586AU

2 Investments in the Macquarie Emerging Markets Infrastructure Securities Fund (the Fund) are not deposits with or other liabilities of Macquarie Bank Limited ABN or any of its affiliates (Macquarie Group) and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any other member company of the Macquarie Group guarantees the performance of the Fund or the repayment of capital from the Fund or any particular rate of return. Macquarie Investment Management Limited (Macquarie, we, us, our), as the issuer of this Product Disclosure Statement (PDS), invites you to invest in the Fund. This offer is only open to persons receiving this PDS as a hard copy or electronically within Australia. This PDS contains general advice only and has been prepared without taking into account any investor s objectives, financial situation or needs. Investors should read the PDS carefully and assess whether the information is appropriate for them in respect of their objectives, financial situation and needs. We encourage investors to talk to a financial adviser before making an investment decision. In this PDS, an administration service or an investor directed portfolio service such as a master trust, wrap account or nominee service is referred to as an IDPS. The trustee or operator of the IDPS is referred to as an IDPS operator. We consent to the use of this PDS by IDPS operators that include the Fund on their investment menus. If you are printing an electronic copy of this PDS, you must print all pages including the application form. If you make this PDS available to another person, you must provide them with the entire electronic file or print out, including the application form. The information in this PDS may change from time to time. Where information that changes is not materially adverse to investors, we will update this information by publishing changes on our website at A paper copy of this PDS (and any supplementary documents or updated information) can also be obtained free of charge on request by calling

3 Contents Fund features at a glance 02 About Macquarie 05 About the Fund 05 Emerging market universe 05 Infrastructure in emerging markets 05 The key features of infrastructure assets 05 Investment process 06 What the Fund invests in 06 Fund performance 07 The benefits 07 The risks 08 Fees and other costs 10 Additional explanation of fees and costs 12 Tax 15 How to invest 16 Accessing your money 18 Distributions 19 Unit pricing 19 Keeping in touch with you 20 Our legal relationship with you 20 Enquiries and complaints 22 We respect your personal details 22 About this PDS 23 Consents from external parties 23 Application form Contact

4 Fund features at a glance The table below is a summary of the key features of the Macquarie Emerging Markets Infrastructure Securities Fund (the Fund) and a guide to where more detailed information can be found in this PDS. About the Fund Page What type of investment is this? A registered managed investment scheme. 05 Who manages the Fund? Macquarie Investment Management Limited. 05 Who is the responsible entity of the Fund? What is the Fund s objective? Macquarie Investment Management Limited. The Fund aims to outperform the MSCI EM Infrastructure Sector Capped Index ($A Hedged) (Index) (after fees) over the medium to long term Commencement date of the Fund 17 October What is the suggested minimum investment timeframe? What does the Fund invest in? Three to five years. The Fund primarily invests, directly or indirectly, in listed infrastructure securities issued by entities that own or operate infrastructure assets, or are associated with the development of infrastructure assets in emerging markets. These are emerging market domiciled companies that earn a substantial amount of their revenue/profits from: 1. owning and/or operating infrastructure assets; or 2. businesses or activities associated with the construction/ development of infrastructure assets eg provision of construction and technical services and/or building materials. 06 Minimum transaction and balance requirements Direct investors 16 Minimum initial investment $20,000 Minimum additional investment $10,000 Minimum balance $10,000 Indirect investors Fees Entry fee (referred to as a contribution fee ) We suggest you contact your IDPS operator for minimum transaction and balance requirements. No entry fee is payable Management fee 1.20% pa of the Fund s net asset value (inclusive of the net impact of Goods and Services Tax (GST)). 10 Performance fee 15% of the outperformance of the Fund (after the management fee and expenses) relative to the Index return, subject to a high watermark. The fee is calculated on the net asset value of the Fund and is accrued daily and payable quarterly. 12 Normal expense recovery Capped at 0.40% pa of the Fund s net asset value until 9 July After this time the normal expense recovery is estimated to be 0.40% pa of the Fund s net asset value, but may be higher than this. This recovery reduces the Fund s assets and is reflected in the Fund s unit price. 13 Exit fee (referred to as a redemption fee ) No exit fee is payable. 10 Switching fee No switching fee is payable. 10 Buy/sell spread estimate +0.35% of unit price for applications and 0.35% of unit price for redemptions. 13

5 Risks There are a number of risks that may affect the value of your investment. At the date of this PDS, some of the key risks include, but are not limited to, the following: Performance risk broadly refers to the potential for changes in share prices to result in a loss in the value of your investment in the Fund. This Fund primarily invests in companies that are listed on a share market and as a result is exposed to movements in their share prices. Factors that drive changes in share prices may include changing profitability of companies and the sectors and markets in which they operate, economic cycles, volume of share issuance, investor demand levels, business confidence and government and central bank policies. Volatility risk. The price of the Fund s investments or the unit price of the Fund itself may go up and down by a material amount, even over a short period of time. As an indicator of risk, the greater the volatility of returns the more likely it is that returns will differ from those expected over a given time period. Historically volatility in emerging markets has been higher than in developed markets. You should carefully consider this additional volatility risk before making any investment in the Fund. Liquidity risk exists when particular investments are difficult to purchase or sell, preventing a fund from closing out its position or rebalancing within a timely period and at a fair price. While every effort is made for the Fund to be able to satisfy all redemption requests, prevailing market conditions may result in the Fund not being able to meet all redemption requests when they are received. 08 Distributions Emerging market risk refers to the risk of investing in securities which are listed on the exchanges of emerging economies, as well as investing in companies which are located or have operations within such markets. Emerging markets are typically more volatile than developed markets and may expose the Fund to issues such as heightened political risks, securities whose valuations fluctuate widely, sovereign intervention and the potential for domestic economic management to impact on the viability of infrastructure-based operations within that market. For a full description of these and some other significant risks please see section entitled Risks which begins on page 8. You should read the risks section in full and seek your own professional advice in relation to an investment in the Fund. 3 Frequency Normally semi-annually. 19 Unit pricing Frequency Normally daily. 19

6 Cooling off period Direct investors Indirect investors Contact details Mail If you are a Retail Client (as defined in the Corporations Act) and invest directly into the Fund but decide the Fund is not suitable, you may request a redemption of your units during the 14 day cooling off period. The cooling off period commences when you receive your transaction confirmation or five business days after your units are issued, whichever is earlier. You should consult your IDPS operator about any cooling off rights you may have. PO Box R1723 Royal Exchange NSW Telephone Client Service Fax mfg.clientservice@macquarie.com Website 4

7 About Macquarie We are a full service fund manager with over 25 years experience. We offer a diverse range of products including managed funds across a wide range of asset classes, funds-based structured products, hedge funds and fund of funds. About the Fund The Macquarie Emerging Markets Infrastructure Securities Fund (the Fund) seeks to provide investors with a return consisting of both capital growth and income. The Fund aims to outperform the MSCI EM Infrastructure Sector Capped Index ($A Hedged) after fees over the medium to long term. The Fund primarily invests, directly or indirectly, in listed infrastructure securities issued by entities that own or operate infrastructure assets, or are associated with the development of infrastructure assets in emerging markets, including securities that are expected to be listed on a securities exchange. Currency exposures of the underlying investments are substantially hedged back to Australian Dollars. The Fund may (but is not obliged to) also hedge a portion of its market risk to seek to preserve value in the event of a market downturn. The Fund is managed by Macquarie Investment Management Limited (Macquarie, we, us, our), which is part of Macquarie Funds Group, a division of Macquarie Group Limited. Emerging market universe The emerging market universe currently incorporates, but is not limited to, securities providing exposure to countries such as Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, South Korea, Sri Lanka, Taiwan, Turkey, Thailand, United Arab Emirates and Venezuela. As decided by Macquarie, other emerging market countries may be included from time to time. Infrastructure in emerging markets Infrastructure assets are essential to developing economies because they provide the domestic population with the basic services for both social and economic development. Infrastructure assets typically provide essential services, such as fresh water, roads, airports, utilities, power, communications, hospitals, schools and other social services. These assets provide exposure to any underlying economic growth of emerging markets. Such assets may exhibit a reduced business risk in comparison to some other sectors due to the more predictable cash flows of infrastructure assets. Macquarie believes there are three significant long-term growth drivers of companies that own, operate and/or are associated with the development of infrastructure assets in emerging markets. 1) Economic growth Macquarie believes sustainable economic growth over the long term requires investment in new infrastructure and the maintenance of existing infrastructure assets. We therefore believe that the desire for economic growth in emerging markets is likely to spur infrastructure investments. 2) Rising population and urban migration Macquarie believes a growing population and urban migration place pressure on existing infrastructure and create demand for increased investment, particularly in basic services, such as power, water and sanitation. 3) Greater focus on competitiveness Macquarie believes quality of infrastructure is an important factor impacting a country s competitiveness. We therefore believe higher government and private sector investment in infrastructure is required for any emerging economy to remain competitive and attract foreign direct investment. The Key Features of infrastructure assets include: Essential services: Many infrastructure issuers are the sole providers of an essential product or service (eg water/sanitation, power and transportation services) to a segment of the population and the product or service often retains this characteristic for an extended period of time. Strategic competitive advantages: Many infrastructure assets are monopolistic or nearmonopolistic in nature, thereby providing a strategic competitive advantage. Fixed and regulated returns Monopoly-type market environments may bring access to predictable returns through regulation or long term contracts. 5

8 6 Fixed cost base Once an infrastructure asset is developed, ongoing operational maintenance expenditure may be relatively low and stable. As a result, increases in revenue may not result in proportionate increases in operating expenditure, thereby increasing free cash flow. Relatively inelastic demand Due to the essential service nature of infrastructure, demand for infrastructure-related products or services may be more stable and less sensitive to changes in price compared with some other products or services. Inflation linkage The underlying revenue of infrastructure assets may be linked to inflation, sometimes directly through a regulatory framework or through concession agreements linking price growth to inflation. Infrastructure development A significant amount of the infrastructure required in emerging markets is yet to be built. There should therefore be a long-term structural increase in the demand for infrastructure development products and services. Investment process The Fund adopts a systematic, bottom up, fundamentals-based approach, complemented by topdown analysis, to identify infrastructure securities with superior earnings growth and relatively low business risk in emerging markets. The Fund has a five stage investment process: 1. Generation of investment opportunities Investment ideas are generated from company and country visits conducted by the investment team. The identification of thematic trends in emerging markets infrastructure and a periodic screen of the investment universe also help identify those infrastructure companies with a good balance between strong earnings growth and relatively low business risk. In addition, emerging market macroeconomic analysis is utilised to identify investment themes and risks which help position the Fund to take advantage of medium and long term trends. 2. Security selection We carry out detailed bottom-up analysis of individual securities. This will generally include the analysis of key revenue and earnings drivers, growth potential, management quality, competitive analysis and infrastructure characteristics. Our analysis focuses on the selection of equity securities issued by emerging market domiciled entities that own, operate and/or are associated with the development of infrastructure assets. Preference is given to securities with a strong earnings growth outlook. 3. Country analysis Top-down analysis is utilised to assess the overall economic environment and analyse the fundamentals of each country within the broader global and geopolitical environment. This includes the assessment of each country s economic health, its ability to service its debts, access to global funding, local sentiment and political conditions. 4. Portfolio management The portfolio is constructed with a specific focus on the expected return and risk of underlying investments. Risk is reduced through diversification across subsectors, geographic regions and regulatory regimes. The Fund may also hedge a portion of its assets to seek to preserve value in the event of a market downturn. 5. Investment monitoring and sell discipline A security may be sold if there is an adverse change to the underlying investment thesis. In addition a security may be sold if the macroeconomic outlook for the country it operates in deteriorates or if the company becomes materially overvalued. What the Fund invests in The Fund primarily invests, directly or indirectly, in listed securities issued by entities that own or operate or are associated with the development of infrastructure assets in emerging markets. These are emerging market domiciled companies that earn a substantial amount of their revenue/profits from: 1. owning and/or operating infrastructure assets; or 2. businesses or activities associated with the construction/development of infrastructure assets eg provision of construction and technical services and/or building materials. The Fund principally invests in equity securities in emerging markets and can also invest in securities that are expected to be listed on a securities exchange. Values of the underlying investments are substantially hedged back to Australian Dollars. The Fund may also hedge a portion of its assets to seek to preserve value in the event of a market downturn.

9 The Fund may invest in derivatives, primarily for currency and market hedging and as an alternative to buying and selling physical securities. Exposure to securities issued by vehicles controlled or managed by Macquarie Group Limited ABN , or any of its affiliates (Macquarie Group) is limited to 10% of the gross asset value of the Fund (at the time of investment). As at the date of this PDS, the Fund has no exposure to such securities. Use of derivatives The Fund may use derivatives such as futures, forwards and options: to hedge market exposure; to hedge currency exposure; as an alternative to buying and selling physical securities. Ethical investments Our investment decisions are primarily based on economic factors and we do not specifically take into account labour standards or environmental, social or ethical considerations. However, these considerations may be taken into account if they have the potential to materially affect the value of the investment, but no specific methodology is applied. Fund performance Performance history and Fund size information can be obtained from: Client Service on , 8.30am to 6.00pm, Monday to Friday; or your IDPS operator and financial adviser. To calculate the performance of the Fund, we comply with the standards set by the Investment and Financial Services Association (IFSA). Performance figures are calculated before tax and after deducting ongoing fees and expenses, using net asset value prices, assuming that income is reinvested and that the investment is held for the full period. The performance figures are historical and past performance is not necessarily an indication of future performance. Returns can be volatile, reflecting rises and falls in the value of the underlying investments. If you are investing through an IDPS, the net performance of your investment in the Fund may be different from the information we publish, due to cash flows specific to your portfolio and any fees charged by the IDPS operator. The benefits Return The Fund provides the potential for returns comprising both capital growth and income. We seek to do this by primarily investing in listed infrastructure securities in emerging markets. Diversification The Fund has investment guidelines designed to diversify exposures across sub-sectors, geographic regions and regulatory regimes while providing some flexibility to hedge downside risk to seek to preserve value in the event of a market downturn. Investment approach The investment process for the Fund utilises both a systematic, bottom-up, fundamentals-based approach complemented by top-down political and macroeconomic analysis. Reduced currency risk We substantially hedge back the value of the underlying investments to Australian Dollars which reduces an investor s exposure to changes in the value of the Australian Dollar relative to emerging market currencies. Experienced management Macquarie is a full service fund manager with expertise in all major asset sectors and over 25 years funds management experience. Our strong client focus, disciplined investment processes and dedication to innovation have established our reputation as one of Australia s leading fund managers. Specialist asset expertise As of 31 March 2010, the Macquarie Group had infrastructure funds under management of approximately $A92 billion. Macquarie has established a leading position in specific asset class investor funds, including infrastructure. Macquarie leverages this experience to invest and manage the Fund. Managed funds In general, managed funds (including this Fund) have certain advantages. They can: allow access to investment opportunities, the expertise of investment professionals, markets and diversity that may usually not be accessible to all investors; usually invest for less cost than an individual investing directly; > > have access to investment techniques that may not be available to all investors. 7

10 8 Liquidity The Fund invests predominantly in liquid securities. We aim to process redemptions on a daily basis. However, there are several factors that may affect the liquidity of the Fund, including but not limited to, potential delays on some occasions due to potential investment in assets that are expected to be listed, but not yet listed. Please refer to page 18 for other circumstances where redemptions may be delayed. The risks Prospective investors should give careful consideration to the factors set out below in evaluating the merits and suitability of an investment in the Fund. The following does not purport to be a comprehensive summary of all of the risks associated with an investment in the Fund. There are risks associated with any investment. Generally, the higher the expected return of an investment, the higher the risk and the greater the variability of returns and the risk of loss of capital. Macquarie s risk management objective is to deliver risk/ return outcomes in line with our clients expectations. However, we cannot provide assurances or guarantees on future profitability and Fund returns, distributions and return of capital. The most common risks are described below, but there could be other risks that affect the performance of the Fund. You should seek your own professional advice on the appropriateness of this investment to your circumstances. A financial adviser can explain these risks and provide advice based on your financial objectives, time frame for investing and attitude to risk. Please ensure that you consider the risks of investing in the Fund, including those set out below. As well as considering the risks, you should also consider how an investment in this product fits into your overall investment portfolio. By diversifying your investment portfolio, you may reduce your exposure to failure or underperformance of any one investment, manager or asset class. Performance risk broadly refers to the potential for changes in share prices to result in a loss in the value of your investment in the Fund. This Fund primarily invests in companies that are listed on a share market and as a result is exposed to movements in their share prices. Factors that drive changes in share prices may include changing profitability of companies and the sectors and markets in which they operate, economic cycles, volume of share issuance, investor demand levels, business confidence and government and central bank policies. Volatility risk. The price of the Fund s investments or the unit price of the Fund itself may go up and down by a material amount, even over a short period of time. As an indicator of risk, the greater the volatility of returns the more likely it is that returns will differ from those expected over a given time period. Historically volatility in emerging markets has been higher than in developed markets. You should carefully consider this additional volatility risk before making any investment in the Fund. Liquidity risk exists when particular investments are difficult to purchase or sell, preventing a fund from closing out its position or rebalancing within a timely period and at a fair price. While every effort is made for the Fund to be able to satisfy all redemption requests, prevailing market conditions may result in the Fund not being able to meet all redemption requests when they are received. Investment objective risk is the risk that an investor s objectives will not be met by their choice of investments. This Fund offers exposure to the infrastructure sector within emerging market nations. As this is a specific asset class, such exposure may not meet every investor s needs. Emerging market risk refers to the risk of investing in securities which are listed on the exchanges of emerging economies, as well as investing in companies which are located or have operations within such markets. Emerging markets are typically more volatile than developed markets and may expose the Fund to issues such as heightened political risks, securities whose valuations fluctuate widely, sovereign intervention and the potential for domestic economic management to impact on the viability of infrastructure-based operations within that market. Infrastructure sector risk is the potential for adverse events in the global infrastructure market to impact the performance and returns of this Fund. The investment style of this Fund will result in a concentrated group of investments focused on gaining exposure to companies in, or related to, the infrastructure sector. Factors such as the availability of finance, the cost of such finance in general as well as in comparison to prior periods, the level of supply of suitable infrastructure projects and government regulations relating to infrastructure may influence the value of these investments and hence this Fund. Foreign investment risk exists for those securities which are listed on foreign securities exchanges. This risk exposes the investments of the Fund to a range of macroeconomic factors which are unique to the country of investment/operation, and may include factors such as political instability, differing tax or legal rulings and potentially rapid changes in asset prices (particularly for emerging economies). Sovereign risk is the risk of a government invoking policy or regulation that changes the established rights

11 of private sector companies. There is a further risk that a government may prevent or limit the repatriation of foreign capital or the availability of legal redress through the courts. There is also the risk of government intervention in the operation of financial markets, for instance a forced closure of markets. Such intervention may severely impact the value of any investments the Fund holds that have an exposure to, or operations within the affected country. Short Selling risk. The investment manager has the ability to short relevant indices in order to manage the Fund s exposure to the market. A short position is one that will result in the Fund profiting from a decline in the value of the market, but will conversely result in losses if the market increases in value. Losses on short positions may be large and are theoretically unlimited. Non-infrastructure sector risk exists for this Fund as some securities held may not be solely related to the emerging markets infrastructure sector. A company must meet defined criteria in order for its securities to be traded by the Fund, such as a substantial amount of the company s income being derived from infrastructurerelated activities in emerging markets. As a result, the Fund may hold the securities of companies that are exposed to risks and returns other than those typically associated with the emerging markets infrastructure sector. Concentration risk is the risk that poor performance in a group of stocks common to a particular region, industry, or other grouping, will significantly affect the performance of the Fund. This risk is pertinent for the Fund as it seeks to focus investments in companies within the infrastructure sector which have an exposure to emerging markets. Currency risk is the risk that fluctuations in exchange rates between the Australian dollar and foreign currencies may impact the value of the Fund s investments. This risk exists for investments in securities which are listed on foreign stock exchanges, as well as investments in Australian securities which derive a portion of their income from outside of Australia. The Fund seeks to reduce this risk by engaging in currency hedging. Derivative/leverage risk. Derivatives are leveraged instruments that are used to obtain or reduce market exposures. As the market value of derivatives is variable, gains or losses can be incurred and can be greater than unleveraged positions. The Fund may utilise derivatives in order to achieve its investment objectives. To reduce the risks of leverage, we ensure that short derivatives positions are backed by a matched amount of similar physical assets and long derivatives positions are backed by a matched amount of liquid assets such as cash equivalents. Default risk is the risk of loss due to a counterparty not honouring a financial commitment. Counterparties to this Fund may include issuers of the securities which the Fund invests in, the Custodian which holds the assets of the Fund, derivative brokers and counterparts to transactions involving instruments such as swaps and foreign exchange derivatives. Default risk is generally greater for counterparties or issuers with lower credit ratings. Company specific risk is inherent in a particular stock s performance due to factors that are pertinent to that company. These factors may cause a stock s return to differ from that of the market. Actively managed funds look to gain exposure to this risk in order to attempt to outperform the market, however this exposure can also lead to underperformance. Valuation risk refers to the risk that the Fund s assets may be difficult to value. This may result from factors such as any form of sovereign intervention, the lack of an independently verifiable price or securities being traded infrequently. Where the Fund is unable to observe a reasonable market value for its holdings, Macquarie will value those securities in accordance with its valuation policy. Unlisted securities risk includes securities which are not yet listed on a stock exchange. The price of these investments may be volatile, and there may be delays and/or losses when selling unlisted securities due to liquidity constraints. 9

12 Fees and other costs The information in the tables below is required by law and is designed to help you better understand the fees and costs associated with the Fund. Did you know? Small differences in both investment performance and fees and costs can have substantial impact on your longterm returns. For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example, reduce it from $100,000 to $80,000). You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs. You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask Macquarie or your financial adviser. To find out more If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website ( has a managed investment fee calculator to help you check out different fee options. This table shows fees and other costs that you may be charged. These fees and costs may be deducted from the returns on your investment or from the Fund s assets as a whole. Taxes are set out in the Tax section of this PDS. You should read all of the information about fees and other costs, as it is important to understand their impact on your investment. Type of fee or cost Amount How and when paid Fees when your money moves in or out of the Fund You may also incur a buy/sell spread 1 when your money moves in or out of the Fund. Establishment fee The fee to open your investment. Nil Not applicable Contribution fee The fee on each amount contributed to your investment. Nil Not applicable 10 Redemption fee The fee on each amount you take out of your investment. Nil Not applicable Termination fee The fee to close your investment. Nil Not applicable Management costs The fees and costs for managing your investment 2 The management costs consist of: Management Fee 1.20% pa of net asset value (inclusive of the net impact of GST). 3 Plus Performance Fee 15% of the outperformance relative to the Index, subject to a high watermark, (see page 12 for details). The management fee accrues daily and is payable quarterly in arrears. It is deducted from the Fund s assets and is reflected in the Fund s unit price. The performance fee accrues daily and is payable quarterly in arrears. It is deducted from the Fund s assets and reflected in the Fund s unit price.

13 Management costs continued Plus: Normal expense recovery Capped at 0.40% pa of the Fund s net asset value until 9 July After this time the normal expense recovery is estimated to be 0.40% pa of the Fund s net asset value, but may be higher than this. Where applicable, these costs are generally paid when incurred. This deduction reduces the Fund s assets and is reflected in the Fund s unit price. Service fees 4 Switching fee This is the fee for when you switch between investment options. You may also incur a buy/sell spread when switching between investment options. Nil Not applicable 1 See Buy/sell spread estimate under section Additional explanation of fees and costs. 2 Additional fees may apply, as well as the abnormal expense recovery, see section Additional explanation of fees and costs. 3 For sophisticated and professional investors these fees may be negotiated. See Differential fees under section Additional explanation of fees and costs. 4 See Adviser service fee under section Additional explanation of fees and costs. All fees in the table above are shown inclusive of GST, net of Reduced Input Tax Credits (RITCs). Example of annual fees and costs of the Fund This table provides an example of how the fees and costs in the Fund can affect your investment over a one year period. You should use this table to compare the Fund with other managed investment products. The example assumes an account balance of $50,000 invested in the Fund, assuming no variation in the value of your investment over this period. In practice: the actual fee we charge is based on the value of your investment; your investment balance and the value of the Fund will vary daily; the management fee is included in the Fund s return and is not an additional charge to you. Example Balance of $50,000 with total contributions of $5,000 1 during year Contribution fees Nil For every additional $5,000 you put in, you will not be charged a contribution fee. PLUS management costs (management fee plus normal expense recovery estimate but not including the performance fee) = 1.60% pa And, for every $50,000 you have in the Fund, you will be charged $800 each year. 11 Equals cost of Fund If you had an investment of $50,000 at the beginning of the year and you put in an additional $5,000 during that year, you will be charged fees of $ What it costs you will depend on the fees you may be able to negotiate with us. 1 We are required to use examples based on an additional contribution of $5,000. However, please note that the minimal additional investment amount for the Fund is $10, Additional fees may apply, as well as the abnormal expense recovery.

14 Additional explanation of fees and costs Performance fee We also charge a fee based on the Fund s performance over the Index, subject to a high watermark. Details of the fee structure are contained in the Fund s constitution. The performance fee is accrued from the performance fee commencement date or PFCD of 7 November In general terms: 1. Each day, the performance of the Fund since the PFCD is compared with the performance of the Index since the PFCD of the Fund. Performance is calculated after the deduction of the management costs (paid or accrued) but before the deduction of performance fees and disregards any applications in and redemptions out of the Fund. The positive difference is referred to as outperformance. 2. A high watermark is then set each time: the level of outperformance exceeds the previous highest level of outperformance since the PFCD of the Fund; and the Fund has outperformed the Index in the period since the last high watermark was set. 3. The amount by which the Fund outperformance on a day exceeds the current high watermark (if any) ( Difference ) is then calculated. 4. If the current high watermark is exceeded on a day, a performance fee of 15% of the Difference is then accrued. That is, the Fund must outperform the current high watermark before a performance fee is accrued. The performance fee is calculated daily and payable quarterly. 5. However, if the current high watermark is not exceeded, no performance fee is deducted at all, even if the Fund performance has exceeded the Index performance on that day. Example Balance of $50, On a day, the Fund performance since the PFCD is compared with the Index performance since the PFCD and there is no outperformance. On a day, the Fund performance since the PFCD, when compared with the Index performance since the PFCD, has outperformed the Index. However, the Fund outperformance since the PFCD is less than the previous highest level of outperformance since the PFCD of the Fund (the high watermark ). On a day, the outperformance of the Fund exceeds the last high watermark by 2%. However, the Fund performance does not exceed the Index performance since the last high watermark was set. On a day, the outperformance of the Fund exceeds the last high watermark by 2%. In addition, the Fund performance has exceeded the Index performance since the last high watermark was set. No performance fee is payable. No performance fee is payable. No performance fee is payable. 15% x 2% x $50,000= $ These examples are provided for illustrative purposes only and do not represent any actual or prospective performance of the Fund. We do not provide any assurance that the Fund will achieve the performance used in the example and you should not rely on this in determining whether to invest in the Fund. It is not possible to estimate the actual performance fee payable in any given period, as we cannot accurately forecast what the performance of the Fund will be. For further details regarding the calculation of performance of the Fund, please see page 7.

15 Buy/sell spread estimate There is a difference between the entry and exit unit price quoted on any business day. This difference relates to the Fund s transaction costs on acquiring the underlying investments (when purchasing units), and disposing of the underlying investments (when making a redemption). It is referred to as the buy/sell spread and is an additional cost to you. To ensure that existing investors do not continually bear the transaction costs resulting from the applications or redemptions made by other investors, we charge investors the buy/sell spread when they transact, except in certain circumstances (see below). Transaction costs are not a payment to us and may be substantially lower than an individual investor would incur if constructing a similar portfolio. The buy/sell spread estimate represents our estimate of the transaction expenses in acquiring or disposing of the underlying assets of the Fund. These transaction costs may comprise brokerage and the buy/sell spreads (being the difference between the bid and offer prices) on exchange traded and non-exchange traded transactions. Reinvested distributions do not incur the buy spread. The example below is based on an application or redemption of $50,000. Buy /sell spread estimate Cost Application % $175 Redemption % $175 In arriving at these estimates, we take into account the brokerage paid on buying and selling the securities and the average buy/sell spreads in normal conditions. However, we may vary the adjustment to unit prices from the buy/sell spread from time to time, for example, we may apply a different estimate when brokerage costs change. Where conditions are not considered to be normal, we may at our discretion increase the spreads, for example, to reflect the increased buying or selling costs incurred. when there are liquidity constraints in the market. Further, we may at our discretion reduce the buy/sell spread where: Maximum fees we are allowed to charge The constitution of the Fund provides for the following maximum fees (exclusive of the net effect of GST): a maximum entry fee (referred to in this PDS as a contribution fee ) of 5.0% of the application amount; a maximum exit fee (referred to in this PDS as a redemption fee ) of 5.0% of the amount withdrawn; a maximum management fee of 5.0% of the amount invested; a maximum switching fee of 5.0% of the value of the investment switched; a maximum performance fee rate of 50% of outperformance over the Index. Expense recoveries The constitution of the Fund allows all properly incurred expenses to be recovered directly from the Fund and does not place any limit on the amount of such expenses that we can recover from the Fund. Normal expenses include custody fees, registry costs, compliance committee costs, audit, accounting fees, tax consulting fees, research costs, postage and printing costs. The normal expense recovery will be capped at 0.40% pa of the Fund s net asset value until 9 July After 9 July 2011 we estimate that the expense recovery will be around 0.40% pa of the Fund s net asset value. However, this figure is an estimate only and the actual amount of expenses may be higher than the stated estimate. We are also entitled to be reimbursed from the Fund for abnormal expenses, such as the cost of unitholder meetings, defending legal proceedings, special valuation of assets and the costs of terminating the Fund. These abnormal expenses are not generally incurred during the day-to-day operation of the Fund and are not necessarily incurred in any year. However, if they arise, we reserve our right to deduct these expenses from the Fund. 13 there is a simultaneous purchase and redemption of units of equivalent value by different investors; or an investor subscribes assets (rather than cash) on an application or receives assets (rather than cash) on a redemption.

16 14 Additional services and charges We can recover from you certain user pays costs for additional services provided at your request or incurred in connection with your particular investment, such as paying redemption proceeds by bank cheque, telegraphic transfer or real time gross settlement (RTGS), and dealing with overseas bank drafts. You agree that we can redeem your units as required to recover the costs we incur on your behalf. These costs represent the standard bank charges we incur and are not a fee paid to us. Currently, these costs are as follows. They may change without notice to you. Service Bank cheque $7.50 Telegraphic transfer $35.00 RTGS Overseas bank draft $20.00 Charge (includes GST if applicable) $5.00 for transactions up to $500,000 and free for transactions of $500,000 and above Adviser service fee You may agree to pay your adviser a fee for any financial advice that they provide to you. However, these are separate to any fees we charge in respect of your investment in the Fund, as set out in the table on page 10. Commissions and soft dollar payments We do not pay any commissions to your financial adviser. However, the dealer group to which your adviser belongs and your IDPS operator may receive certain payments or other non-monetary benefits from us, such as business and technical support, professional development and entertainment. The provision of such benefits is governed by our Soft Dollar Policy. These payments and benefits are not an additional cost to you. We also maintain a register in compliance with the Industry Code of Practice on Alternative Forms of Remuneration summarising alternative forms of remuneration that are paid or provided to advisers. If you would like to review this register, please contact Client Service on (8.30am to 6.00pm Sydney time, Monday to Friday). Differential fees We may negotiate reduced management fees and performance fees as permitted by the Corporations Act and ASIC relief, for example, we negotiate reduced fees with sophisticated and professional investors, as defined in the Corporations Act, including IDPS operators. There is no set manner or method of negotiating fees. For further information please contact Client Service. Related party transactions In the execution of transactions, we deal with professional organisations that may include Macquarie Group Limited or its associated companies. All transactions are conducted on arm s length terms. We can also trade the Fund s investments with Macquarie Group Limited or associated companies where we believe the investments are in the best interest of investors. These organisations may receive commissions at prevailing market rates for the execution of transactions. Any conflict of interest or potential conflict of interest is managed in accordance with our Conflict of Interest Policy. The Fund may invest in a number of other funds of which we act as responsible entity. In these circumstances you will only be charged management fees and performance fees (if any) once. Where another Macquarie Group company manages the underlying fund(s) you may be charged their management fees and performance fees which will be reflected in the Fund s return. Other related party issues Macquarie Group is a global provider of banking, financial, advisory, investment and funds management services. Macquarie s main business focus is making returns by providing a diversified range of services to clients. Macquarie acts on behalf of institutional, corporate and retail clients and counterparties around the world. Macquarie Investment Management Limited, as responsible entity and manager of the Fund, generally has no control over these activities. As a result, from time to time the Fund s activities may be restricted, for example due to regulatory constraints applicable to the Macquarie Group, and/or its internal policies designed to comply with such constraints. In addition, where, due to such constraints there is limited capacity to acquire particular securities, the Fund will not have priority over any member of, or any Fund associated with, the Macquarie Group to acquire those securities. Change to fees and expenses We may increase the fees and expenses referred to above or introduce new fees, for example, if economic conditions or the law changes. We will provide at least 30 days notice to you of any proposed increase in fees and expenses or introduction of new fees. This notice period should give you sufficient time to withdraw from the Fund if so desired. We cannot charge more than the constitution allows, unless we obtain investors approval to do so.

17 Tax The information contained in the following summary is intended to be of a general nature only. It does not constitute tax advice and should not be relied on as such. All unit holders should seek independent professional advice on the tax consequences of their subscription for units, based on their particular circumstances. Tax position of the Fund Income tax As investors in the Fund will be presently entitled to the entire amount of the income of the Fund for each relevant financial year, the Fund should not be liable to Australian income tax, under present income tax legislation provided that there is at least $1 of distributable income for the relevant financial year. If the Fund incurs a loss in a financial year there will be no distributable income for that year and the loss may be carried forward to be utilised in subsequent financial years (subject to the loss carry forward rules) Tax position of resident investors On 7 May 2010 the Federal Government announced that a new tax system for Managed Investment Trusts will commence on or after 1 July The Fund will monitor the progress of this announcement and subsequent law to determine what, if any, impact this announcement will have on the Fund. The following comments only deal with Australian residents who are individuals, complying superannuation entities and companies that will hold their units on capital account. Capital Gains Tax (CGT) An Australian resident investor s assessable income for each year includes any net capital gains (ie, after offsetting capital losses). There are two potential sources of capital gains tax to investors in relation to investing in the Fund: 1. Capital gains tax may be payable on part of the distribution made in respect of units from the Fund on the basis that the assets in the Fund are held on capital account. The Fund does not make allowance in the unit price for any tax on unrealised net gains accruing when investments are re-valued. As a result, investors should be aware that they may be liable for capital gains tax arising from the sale of assets where unrealised gains arose before they bought their units. The distribution by the Fund of non taxable amounts (if any) may give rise to cost base adjustments to an investor s units for CGT purposes. Such cost base adjustments may result in either increased capital gain or reduced capital loss on the subsequent disposal of units in the Fund. 2. Capital gains tax may be payable when units are redeemed from the Fund (assuming the investor holds the units on capital account). Concessions may be available depending on how long the units have been held. Where the units have been held continuously for more than 12 months, individuals and trusts may be entitled to a CGT discount of 50% and superannuation entities may be entitled to a discount of 33 1/3% in relation to the disposal of units. Companies are not entitled to this discount. Capital gains arising from securities sold to meet a substantial investor s redemption can be distributed to the redeeming investor. A substantial redemption is one that is 5% or more of the Fund s net asset value. In these circumstances the objective would be for remaining investors not to be affected by the capital gains resulting from a disposal of the assets where both the Fund and the redeeming investors make a capital gain in the relevant financial year. The 5% threshold may be varied by Macquarie with advance notice to investors. Franked Dividends The Fund should also be able to distribute franking credits through investment in Australian companies. Franking credits attached to distributions will be shown in investors annual tax statements. Foreign income tax offsets Australian residents are required to include in their assessable income their share of certain foreign taxes paid in respect of income derived by the Fund. Investors will normally be able to benefit from a tax credit in respect of foreign taxes paid by the Fund. Foreign source income At the date of this PDS, a number of amendments are proposed to the taxation of foreign source income earned by Australian taxpayers. As not all of these proposed amendments have been released we are not able to determine their effect on the Fund and its investors. Once the amendments have been finalised we will review their effect on the Fund and investors and and will advise of any material impacts on the Fund and its investors. Tax file number (TFN) and Australian business number (ABN) It is not compulsory for investors to provide their TFN or ABN, and it is not an offence if they decline to provide them. However, unless exempted, if the TFN or ABN is not provided, tax will be deducted from income at the highest marginal rate plus the Medicare levy. These numbers can be provided on the application form when making an initial investment. 15